What is Loan Against Property?

As the term itself suggests, loan against property or LAP is a credit availed by keeping your property as a mortgage with the lender. Typically, the banks in India take the asset as a security cover in case the loan applicant fails to repay the amount availed. So, if you fail to repay the loan in time, the lender has the authority to sell/auction the property and recover the money.

One of the important things you must know about LAP is that the lenders provide only a certain percentage of the market value of the property. The banks usually lend about 50% to 60% of the property. Other private lenders give about 80% of the property value. Since you keep collateral with the lender, LAP is a secured loan.

Reasons why people apply for LAP

Just like personal loans, you can use LAP for many reasons, including but not restricted to:

• Paying your child’s education fees

• Funding any medical emergency

• Wedding

• Going on a dream holiday

• Buying new machinery for business or business expansion

What property can your mortgage?

You can keep any property that you own as collateral bit it a residential property, a piece of land, or a business property. The only condition is that the property should be free of litigation and must have a clear title.

Benefits of LAP

• Easy to avail

Since LAP is a secured loan, most lenders do not have any hesitation in providing these loans. You can easily avail the credit from all major banks in India.

• Flexible duration

Generally, LAP is provided for a longer duration up to 15 years or more. However, if your financial condition is strong, you can close the loan early. The banks do not charge any prepayment fees. Also, since the duration is long, it gives you plenty of time to repay the loan.

• Ownership of the property

Even though you pledge your property to avail the loan, the ownership of the same remains with you. Your property will be returned to you as soon as you pay the last installment.

• Competitive rate of interest

Since the loans the availed against the property, the interest rate for LAP is generally lower as compared to a personal loan. The interest rate varies from lender to lender, but it is generally in the range of 12-15%, which is much lower than the personal loan interest rate, which ranges between 15% to 25%.

• Tax benefit

Apart from getting cash to meet your expenses, you can also enjoy loan against property tax benefits. If you are a salaried employee, you can claim for deduction under section 24(B) of the Income Tax Act. The tax deduction is applicable on the interest paid and not only the principal amount.

With so many benefits of loan against property, meeting the emergency expenses has become easier than ever before.

Learn more about your home loan eligibility here.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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